How much tax deduction can I claim?

I am a central government servant. My contributions to Public Provident Fund (PPF), Equity Linked Saving Schemes (ELSSs), insurance cover from Life Insurance Corporation of India (LIC) is ₹1.3 lakh. My NPS contribution (employee contribution deducted from salary) is ₹60,000. How much tax benefit will I get - ₹1.9 lakh or ₹1.5 lakh?
- Kunal Tatte

An employee's contribution is eligible for tax deduction of up to 10 per cent of his salary (basic + DA) under Section 80CCD(1) within the overall ceiling of ₹1.5 lakh under Section 80CCE. The employee is also eligible for tax deduction of up to 10 per cent of his salary (basic + DA) contributed by the employer under Section 80CCD(2) over and above the limit of ₹1.5 lakh provided under Section 80CCE. As per the last Budget, an additional tax deduction of up to ₹50,000 can be claimed under Section 80CCD(1B) on investments in NPS. However, the aggregate amount of deduction under section 80C, 80CCC and 80CCD(1) cannot exceed ₹1.5 lakh.

That means you can claim a total tax deduction of ₹1.9 lakh like this: Your contribution to NPS is ₹60,000. You can claim a deduction of ₹50,000 under section 80CCD(1B) and ₹10,000 under section 80CCD(1). The remaining ₹1.3 lakh can be claimed under section 80C on your investment in PPF, ELSS, and LIC.

This article was originally published on November 30, 2015.